Abstract: A method for enhancing and/or increasing the efficiency of repair of tissues, primarily bone or cartilage, using genetically engineered cells has been developed. In the preferred embodiment, mesenchymal stem cells are isolated from periosteum tissue, and transfected with the gene encoding a growth factor for the particular cell type to be repaired. For example, for repair of bone, a gene (or genes) encoding bone morphogenic protein is transfected into periosteal cells. The transfected periosteal cells then express the bone morphogenic protein in culture to promote bone repair as a function of the expressed bone morphogenic protein. Cells can be transfected using any appropriate means, including viral vectors, as shown by the example, chemical transfectants, or physico-mechanical methods such as electroporation and direct diffusion of DNA.